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– Advisory by KPMG

Board and Directors

The board, director and company refers to the functional responsibility of those charged with governance in any entity.

Role of the board

The board should:

- Lead the entity ethically for sustainability in terms of the economy, environment and society, taking into account its impact on internal and external stakeholders

- Strategically direct, control, set the values, align management to the latter and promote the stakeholder–inclusive approach of governance

- Ensure that each director adheres to the duties of a director

- Ensure that the company is and is seen to be a responsible corporate citizen

- Ensure the company’s ethics are managed effectively through building an ethical culture, setting ethics standards, measuring adherence and incorporating ethics into its risk management, operations, performance management and disclosure

- Be the focal point of governance; have a charter, meet at least four times a year, monitor management and stakeholder relations and ensure the company survives and thrives

- Appreciate strategy, risk, performance and sustainability are inseparable

- Ensure the company has an effective and independent audit committee

- Govern risks

- Be responsible for IT governance

- Ensure the company complies with laws and considers rules, codes and standards

- Ensure there is an effective risk– based internal audit function

- Ensure integrity of the integrated report

- Report on the effectiveness of internal controls

- Act in the best interests of the company (including managing conflicts and dealing in securities)

- Immediately consider business rescue proceedings should the company become financially distressed

- Elect annually an independent, nonexecutive director as chairman. If the chairman is not independent or is executive, then a lead independent non-executive director should be appointed and justified in the integrated report. The CEO should not become chairman until after three years, the number of chairmanships should be considered and there should be a chairman succession plan

- Appoint the CEO, define the board’s materiality, establish a delegation of authority, evaluate CEO performance and ensure a succession plan for the CEO and senior executives.

Structure and composition of the board

The board should comprise a balance of power with:

- A majority of non-executive directors, of whom the majority should be independent

- Knowledge, skills, resources, size, diversity and demographics of board to be considered

- A minimum of two executive directors (CEO and Finance Director)

- The CEO and chairman positions should be separate

- One third of non-executives should rotate annually

- Non-executive directors on the board for longer than nine years must be assessed annually for independence and this should be reported

- Board should be able to remove any director without shareholder approval.

- The King Report provides detailed guidance on the role of the chairman and the CEO.

Appointment, development and performance assessment of directors

- A formal process should be established for appointment and development of directors

- A nominations committee should assist with the identification and recommendation of potential directors to the board

- Backgrounds and references should be checked before nomination

- Letters of appointment should be provided to non-executive directors

- Full disclosure of directors should be made to shareholders (King 3 has details of disclosure e.g. education, experience, age, other directorships, etc)

- Directors should receive induction and ongoing training (including changes to laws, rules, standards and codes)

- The performance of the board, its committees and individual directors should be evaluated every year by the chairman or an independent provider. Results should assist training and be disclosed in the integrated report

- Performance evaluation results should inform the nomination for re-appointment of a director.